How to use the profit margin calculator
- Enter revenue for a period such as a month, quarter or year.
- Enter cost of goods sold, operating expenses, and interest, taxes and other items for the same period.
- Read the gross, operating and net margins and the profit at each level.
- Copy the results or share a link to the calculation.
Worked example
$200,000 revenue, $120,000 COGS, $50,000 operating expenses, $10,000 other
Gross profit is $80,000, a 40% gross margin. Operating profit is $30,000, a 15% operating margin. Net profit is $20,000, a 10% net margin.
How it works
Gross profit = revenue − cost of goods sold. Operating profit = gross profit − operating expenses. Net profit = operating profit − interest, taxes and other items. Each margin = that profit ÷ revenue × 100.
Assumptions
- All figures cover the same period.
- You decide which costs count as cost of goods sold versus operating expenses; conventions vary by industry.
Frequently asked questions
What is the difference between gross and net margin?
Gross margin only subtracts direct costs of what you sell. Net margin subtracts everything, including overheads, interest and taxes, so it is always lower or equal.
Is margin the same as markup?
No. Margin is profit as a share of the selling price; markup is profit as a share of cost. A 50% markup is a 33.3% margin. Use the markup calculator to convert.
What is a good profit margin?
It depends heavily on the industry and business model. Compare with your own history and businesses like yours rather than a single benchmark.
Limitations
- Uses the figures you enter; it does not read accounting files.
- Does not calculate EBITDA or contribution margin by product.